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Author Question: When making the make-or-buy decision, international firms must make trade-offs between costs and ... (Read 114 times)

nautica902

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on: Jul 7, 2018
When making the make-or-buy decision, international firms must make trade-offs between costs and three other variables. What are they? Explain the nature of the trade-off international firms must make.
 
  What will be an ideal response?

Question 2

What countries are granted the most-favored-nation status under the GATT?
 
  A) less-developed nations
  B) GATT member countries
  C) any country that requests it
  D) only members of the WTO


DHRUVSHAH

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Reply #1 on: Jul 7, 2018
Answer to Question 1

International firms must make trade-offs between costs and control, risk, investment, and flexibility. Control: Making a component has the advantages of increasing the firm's control over product quality, delivery schedules, design changes, and costs. A firm that buys from external suppliers may become overly dependent on those suppliers. It can also be expensive to enforce contracts with suppliers. Risk: Buying a component rather than making it has the advantage of reducing the firm's financial and operating risks. Investment: Buying from others lowers the firm's level of investment. By not having to build a new factory or learn a technology, a firm can free up capital for other productive uses. Flexibility: A firm that buys rather than makes retains the flexibility to change suppliers as circumstances dictate.

Answer to Question 2

B


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